Miami-based Ryder System Inc., the national provider of rental trucks, logistics and supply chain management services, is looking to cut its liabilities by offering about 11,000 employees the option to convert their monthly annuity benefit to a cash lump-sum benefit.
The company said in an SEC filing that the one-time offer was made so that the company could "reduce the size and potential future volatility of its U.S. pension plan obligations."
Ryder's pension plans were underfunded by $300 million at the end of 2013, with $1.8 billion in assets and $2.1 billion in liabilities.
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According to the filing, the employees receiving the offer "have deferred vested benefits of approximately $370 million representing 20% of our U.S. pension plan obligations."
Ryder said "no additional funding of the pension plan (will be) required for this transaction as all distributions will be made out of existing plan assets." On the other hand, it added, "The plan's funded status is expected to remain materially unchanged as a result of this offer."
The company also said in the filing that it expects a one-time charge in the fourth quarter in an amount that will depend on how many employees accept the lump-sum offer.
As of September 30, it added, its U.S. unrecognized actuarial loss amounted to about $600 million before taxes.
Ryder is by no means the only company to take this route to cut pension obligations; a substantial number of other companies have already taken advantage of this method of reducing their liabilities and lessening the amount they need to contribute to pension plans.
A combination of market volatility and low interest rates have combined to make it difficult for companies to predict how much they will have to contribute to fund future benefits.
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